Finance Act 2004

166 Lump sum rule U.K.

(1) This is the rule relating to the payment of lump sums by a registered pension scheme to a member of the pension scheme (“the lump sum rule”).

Lump sum rule

No lump sum may be paid other than—

(a) a pension commencement lump sum,

[F1 (aa) a pension commencement excess lump sum,]

(b) a serious ill-health lump sum,

[F2 (ba) an uncrystallised funds pension lump sum,]

(c) a short service refund lump sum,

(d) a refund of excess contributions lump sum,

(e) a trivial commutation lump sum [F3 , or]

(f) a winding-up lump sum, F4 ...

F5 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6 (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) For the purposes of this Part, a person becomes entitled to a lump sum under a registered pension scheme—

F7 (za) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a) in the case of [F8 a pension commencement lump sum or a pension commencement excess lump sum], immediately before the person becomes entitled to the pension in connection with which it is paid [F9 (or, if the person dies before becoming entitled to the pension in connection with which it was anticipated it would be paid, immediately before death)],

[F10 (aa) in the case of an uncrystallised funds pension lump sum, immediately before it is paid,] and

(b) in any other case, when the person acquires an actual (rather than a prospective) right to receive the lump sum.

(3) Part 1 of Schedule 29 gives the meaning of expressions used in the lump sum rule.

(4) Schedule 36 contains (in Part 3) transitional provisions about lump sums.

[F11 (5) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of Schedule 29, or Part 3 of Schedule 36, in connection with cases involving a lump sum within subsection (6).

(6) A lump sum is within this subsection if—

(a) the sum is paid on or after 19 September 2013 and before 6 April 2015, or

(b) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled.

(7) The provision that may be made under subsection (5) includes provision altering the effect of amendments made by the Finance Act 2014.]

Textual Amendments

F1 S. 166(1)(aa) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(a), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F2 S. 166(1)(ba) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 54

F3 Word in s. 166(1)(e) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(b), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F4 Word in s. 166(1) omitted (19.3.2014) by virtue of Finance Act 2014 (c. 26), Sch. 5 paras. 5(1), 15

F5 S. 166(1)(g) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(c), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F6 S. 166(1)(h) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(c), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F7 S. 166(2)(za) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 17(3)(a), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F8 Words in s. 166(2)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 17(3)(b), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F9 Words in s. 166(2)(a) inserted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 20 paras. 9, 24(3)

F10 S. 166(2)(aa) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 55

F11 S. 166(5)-(7) inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 13, 15

Modifications etc. (not altering text)

C1 S. 166 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 11

C2 S. 166(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 25(1)-(3)

C3 S. 166(2) modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), art. 23B (as inserted (1.6.2009) by S.I. 2009/1172, arts. 1, 3)

C4 S. 166(2)(a) modified by S.I. 2006/572, art. 23ZE(2) (as inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Taxation of Pension Schemes (Transitional Provisions) (Amendment) Order 2011 (S.I. 2011/732), arts. 1(1), 3)

C5 S. 166(2)(a) modified by S.I. 2006/572, art. 23ZC(2) (as inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Taxation of Pension Schemes (Transitional Provisions) (Amendment) Order 2011 (S.I. 2011/732), arts. 1(1), 3)

Commencement Information

I1 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284